Regional markets wrapped up the third quarter yesterday on a cautious note as investors cooled their heels following a roaring rally that may have overestimated the improvement in the global economy. The Hang Seng Index edged down 0.28 per cent yesterday but still climbed 14 per cent over the past three months, rising above the level it was at when Lehman Brothers Holdings crashed in September last year. Nearly the entire advance came in July, however, as the benchmark gained only 1.9 per cent during the past two months. Across the border, the Shanghai Composite Index dropped 6.1 per cent for its sixth quarterly decline over the past eight. 'The market got ahead of its fundamentals over the past few months, and this [has become] a primary concern,' said Alex Tang Yee-yuk, the chief market strategist at Core Pacific-Yamaichi International. 'So major players are out, and they are adopting a wait-and-see attitude.' Investors loaded up on stocks earlier this year as markets from Australia to Argentina zoomed up in response to co-ordinated government attempts to jump-start the global economy. In the second quarter, Hong Kong's benchmark soared the most in more than 15 years. But the market has since cooled, as recent data signals that a recovery may take longer than expected. In the United States, unemployment has hit a 26-year high and the housing market has still not yet rebounded. On this side of the Pacific, the mainland's exports have tumbled for 10 consecutive months. The mixed picture has put the brakes on trading momentum in Hong Kong. Main-board turnover topped HK$90 billion only three times in the third quarter after once doing so in five consecutive trading sessions during the second quarter. That slowdown could be compounded by a bad batch of initial public offerings that has made the market queasy. Over the past week, four new listings slumped below their offering prices during their trading debuts. 'People are worried that liquidity may not be flowing into the market any more,' said Benjamin Tam, a fund manager at IG Investment. 'So [the market] will probably move sideways until we see more direction.' Investors said they would be on the lookout in the fourth quarter for any signs of a withdrawal of stimulus funds or a tightening of monetary policy and how that could affect corporate earnings, after first-half figures beat expectations. 'The focus is not so much on first-half performance any more but whether [it's sustainable] in 2010,' said Tang. Most markets around the region rose in the third quarter. South Korea jumped 20.4 per cent, Indonesia surged 21.8 per cent, Taiwan climbed 16.7 per cent and Japan gained 1.8 per cent. In Hong Kong yesterday, the Hang Seng Index dropped for the fifth time in the past six sessions, sliding 57.92 points to 20,955.25.